How to distinguish an honest and fraudulent Forex broker

In the current Industry 4.0 era, online business fraud is widely spread in various fields. Starting from an ordinary online shop business to an online trading business. Forex scammers do not usually offer trading services, they just use them as a cover to attract victims’ attention.

Due to the actions of fraudulent brokers, many people consider Forex trading to be an illegal business. In fact, Forex trading is a legal activity that is legal in different countries around the world from UK, United States, Japan, Australia to Indonesia. There are many honest forex brokers out there.

Most experienced forex traders have understood the existence of real and fake forex brokers. However, aspiring traders are often confused as to how to tell the difference between an honest forex broker and a scam. This article will help you gauge the credibility of a forex broker with some handy tricks. let’s see together

How to distinguish an honest and fraudulent Forex broker

  1. Check Forex Broker Licensing

An honest forex broker should be licensed by an official regulatory body. Many countries already have forex regulators, so all you need to do is check the company profile or license information listed on the broker’s website. Some well-known forex regulatory bodies are: NFA and CFTC in United States, UK FCA, ASIC Australia, JFSA Japan, CySEC Cyprus, BAPPEBTI Indonesia and so on.

Sometimes there are forex brokers that are not regulated and claim to be in the process of applying for a license. Potential traders should doubt such claims as official regulators do not allow any company to offer financial services without proper licensing. Therefore, the classification of forex brokers according to their regulatory status consists of only two groups namely officially regulated forex brokers and unregulated forex brokers.

Officially regulated forex brokers and unregulated forex brokers

  1. Don’t be easily lured in by promises of high profits

Do you know why so many people are attracted to rogue forex brokers? One of the main reasons is that they dare to promise extraordinarily high profits, ranging from tens to thousands of percent per year. In fact, the real forex broker only acts as an intermediary that connects traders to the market. It’s like a real estate agent matching home buyers and sellers. There is no business intermediary who can guarantee that the sale and purchase will result in a profit for one or both parties.

Any trading activity and investment in a company carries some risk of loss. This applies to forex trading, stock trading, even real estate investing or the restaurant business. Success and profit can only be determined by the perpetrator, namely the trader himself. The broker as an intermediary is only responsible for servicing trader orders and then receives remuneration in the form of commissions or spreads. Therefore, bona fide forex regulators definitely prohibit regulated forex brokers from promising profits to traders.

Don't be easily lured in by promises of high profits

  1. Be careful with broker bonuses and promotions

Scam forex brokers usually try to lure traders with fantastic promises and lucrative bonuses. For example a $100 cash bonus, a 100% deposit bonus or a free trading robot. They brag like traders are just sitting back and forth to make big profits in a short period of time. In fact, all this is just a trap to lure victims. You will only notice it when you are having trouble withdrawing funds from the broker.

Honest forex brokers generally only promise transparent execution and easy deposit and withdrawal of funds. They will not make excuses to complicate withdrawals. Instead, they try to make it easier for traders by responding quickly to complaints and requests to withdraw funds. Their promotional activities are limited to activities such as trading contests, raffles for goods, referral discounts or providing free analysis tools.

Be careful with broker bonuses and promotions

Also read: ECN or STP Forex Broker, Which One is Best for Traders?

  1. Check the broker office and test customer service

When doing Forex trading activities, you will definitely face technical issues like disconnects, frozen platforms or just confusion about how to deposit and withdraw funds from your account. The customer service (customer service) of an honest broker will definitely answer your questions and complaints quickly according to his working hours. On the other hand, rogue brokers provide answers that are confusing or even hard to come by.

More specifically, an honest broker will not hesitate to put the full office address on the website. You can visit his office in real time or view it via Google Map. On the other hand, fraudulent brokers do not dare to clearly state the address, but only a post office box or even the name of the country of domicile.

Check the broker office and test customer service

  1. Check broker references

One of the easiest ways to choose a broker is through referrals from friends or family members who have forex trading experience. However, not everyone has access to such accurate references. If you need external references, try searching on Google, online dealer forums, or social media. For example on the sites forexfactory.com and forexpeacearmy.com

An honest forex broker that has been around for many years should have many registered traders. These traders are certainly not silent, but actively give testimonies. Especially in times of social media like now, it should be possible to transmit and display positive and negative broker opinions transparently on the company’s Facebook or Twitter pages.

Also read: Best and Trusted Forex Broker 2020

However, you must be objective when evaluating broker testimonials. There are traders who give brokers bad reviews even though they are suffering losses through their own mistakes. Fraudulent brokers usually get not only a handful of bad testimonials, but also many complaints about failed withdrawals or withdrawals of funds truncated to hundreds of dollars.

Also read: How to read and use the forex factory calendar

Conclusion

There are many ways to distinguish an honest forex broker from a scammer. In summary, the following five points can be summarized:

  1. An honest broker must be officially regulated by a credible institution, while a rogue broker has no real license.
  2. Honest brokers don’t promise fantastic profits, while rogue brokers lure profits to attract attention.
  3. Honest brokers do not offer catch promotions and bonuses, while rogue brokers only offer convenience at the beginning. Traders will definitely find it difficult when trying to withdraw funds from rogue brokers.
  4. Honest brokers have clear office addresses and responsive customer service. Fraudulent brokers tend to be reluctant to provide an office address while customer service is slow.
  5. The honest broker has many traders who have joined, few have complained about its trading opportunities. On the other hand, many traders online will complain about fraudulent brokers, especially when it comes to failed withdrawals.

Now that you know these different points, try to rate any of the brokers you know. Is he an honest broker or a scammer? Remember, don’t rush to join a forex broker without doing some research first.